Key takeaways
- A UAE free zone company passes the de minimis test when its non-qualifying revenue in a tax period is no more than 5% of its total revenue or AED 5,000,000, whichever is lower (Ministerial Decision No. 229 of 2025, Article 3).
- The AED 5,000,000 cap only becomes the binding limit once a free zone company's total revenue passes AED 100,000,000; below that, the 5% figure is the lower number.
- A Qualifying Free Zone Person that fails the de minimis test loses its status from the start of that tax period and for the four tax periods that follow, so five periods in total.
- The test is applied to each tax period on revenue, not profit, and it counts sales to individuals, banking, insurance, finance and leasing, and most property activity as non-qualifying revenue.
- Revenue attributable to a permanent establishment, most free zone property transactions and most intellectual property income is left out of both sides of the calculation.
- Passing the test keeps the status; it is not an allowance that lets a Qualifying Free Zone Person earn untaxed non-qualifying income.
What is the de minimis threshold for UAE free zone companies?
Non-qualifying revenue must not exceed 5% of the company's total revenue for the tax period or AED 5,000,000, whichever is lower. The rule appears in Article 3 of Ministerial Decision No. 229 of 2025, which implements Article 4 of Cabinet Decision No. 100 of 2023.
Because the lower figure applies, the percentage controls for most SMEs. The table below uses hypothetical revenue figures to show where each limit bites.
| Total revenue in the tax period (hypothetical) | 5% of total revenue | AED 5,000,000 | Maximum non-qualifying revenue |
|---|---|---|---|
| AED 10,000,000 | AED 500,000 | AED 5,000,000 | AED 500,000 |
| AED 50,000,000 | AED 2,500,000 | AED 5,000,000 | AED 2,500,000 |
| AED 80,000,000 | AED 4,000,000 | AED 5,000,000 | AED 4,000,000 |
| AED 100,000,000 | AED 5,000,000 | AED 5,000,000 | AED 5,000,000 |
| AED 200,000,000 | AED 10,000,000 | AED 5,000,000 | AED 5,000,000 |
AED 5,000,000 or 5% of total revenue, whichever is lower: the ceiling on non-qualifying revenue for a Qualifying Free Zone Person in a tax period. Source: Ministerial Decision No. 229 of 2025, Article 3, checked 26 October 2026.
The rule has applied from 1 June 2023. Ministerial Decision No. 229 of 2025 (issued 28 August 2025) replaced Ministerial Decision No. 265 of 2023, and both state the same 5% and AED 5,000,000 figures with the same effective date.
What counts as non-qualifying revenue in the de minimis test?
Non-qualifying revenue is revenue from Excluded Activities, from activities that aren't Qualifying Activities where the other party is a Non-Free Zone Person, and from dealings with a free zone person that isn't the beneficial recipient of the goods or services. These categories come from Article 4(2) of Cabinet Decision No. 100 of 2023.
Excluded Activities under Article 2 of Ministerial Decision No. 229 of 2025 include transactions with natural persons (subject to listed exceptions), banking, insurance, finance and leasing, and ownership or exploitation of immovable property, plus anything ancillary to those. The table sets out what goes in each side of the calculation.
| Revenue type | Treatment in the de minimis test |
|---|---|
| Sales of goods or services to individuals (natural persons) | Non-qualifying, unless a listed exception applies |
| Revenue from a non-Qualifying Activity with a Non-Free Zone Person | Non-qualifying |
| Revenue from a free zone person that isn't the beneficial recipient | Non-qualifying |
| Banking, insurance, finance and leasing revenue | Non-qualifying, subject to listed exceptions |
| Revenue attributable to a domestic or foreign permanent establishment | Excluded from total revenue and from non-qualifying revenue |
| Free zone immovable property revenue (other than commercial property dealt with free zone persons) | Excluded from both |
| Intellectual property income, other than Qualifying Income from Qualifying Intellectual Property | Excluded from both |
The exclusions come from Article 4(3) of Cabinet Decision No. 100 of 2023 and section 4.4.1 of the FTA's Corporate Tax Guide on Free Zone Persons (CTGFZP1).
How do you calculate the de minimis test step by step?
You calculate it per tax period by taking total revenue, removing the excluded revenue, identifying non-qualifying revenue, and comparing it with the lower of 5% and AED 5,000,000. The FTA guide sets out the method in section 4.4.1.
- Pull total revenue for the tax period from your accounting records.
- Remove revenue attributable to a domestic or foreign permanent establishment, free zone immovable property revenue (other than commercial property dealt with free zone persons) and intellectual property income other than Qualifying Income.
- From what remains, list revenue from Excluded Activities, from non-Qualifying Activities with Non-Free Zone Persons, and from free zone persons that aren't the beneficial recipient.
- Work out 5% of the adjusted total revenue and compare it with AED 5,000,000; the lower figure is your limit.
- Check that non-qualifying revenue is at or below that limit, and keep the working papers with your audited financial statements.
- File the corporate tax return through EmaraTax with the working papers ready if the FTA asks for them.
The FTA guide gives a worked case: total revenue of AED 7,300,000 with AED 500,000 of non-qualifying revenue is 6.85%, above the 5% line, so that company isn't a Qualifying Free Zone Person.
What happens if you exceed the de minimis threshold?
A company that exceeds the threshold stops being a Qualifying Free Zone Person from the beginning of that tax period and for the four tax periods after it, and becomes subject to the standard corporate tax rules and rates. Article 5(2) of Ministerial Decision No. 229 of 2025 sets the five-period rule, and section 4.4 of the FTA guide confirms the standard treatment.
Say a SHAMS trading company with a calendar-year tax period breaches the limit in 2026. On the FTA's reasoning, status would be lost for 2026 to 2030, and the company would be tested again for 2031. That is a hypothetical, and a company in this position should take advice on its own facts.
The rule is triggered if the company fails a condition "at any particular time during a Tax Period", per Article 5(2), so a single large non-qualifying invoice can matter. If you'd rather not track these dates by hand, the free UAE compliance calendar lists your company's tax and compliance deadlines.
What most guides don't tell you
A tiny sale to an individual can fail the test for a start-up. Transactions with natural persons are generally an Excluded Activity, so they count as non-qualifying revenue in full. The FTA guide's start-up example (Example 9) has a company with a single AED 100 sale to an employee: that revenue is 100% non-qualifying, and the company fails the test for that year.
No revenue isn't automatic disqualification. The FTA guide (Example 7) says a start-up with no Qualifying Income in its first periods isn't automatically disqualified, provided it earns no non-qualifying revenue. Where a start-up has both, the percentage test still bites on very small totals.
The AED 5,000,000 cap usually isn't the number that matters. Many owners remember "AED 5 million" and assume that's their room. For any company under AED 100,000,000 of revenue it is the 5% figure that binds, so a company billing AED 10,000,000 has AED 500,000 of room, not AED 5,000,000.
De minimis is one of several conditions, not the only one. Article 5(1) of Ministerial Decision No. 229 of 2025 adds audited financial statements (under Ministerial Decision No. 84 of 2025) alongside the de minimis requirement, and Article 18(1) of the corporate tax law adds the others. Pass one and fail another, and the same five-period consequence follows.
Which deadlines apply to your company?
Free zone status depends on conditions you test every tax period, so the dates matter as much as the rules. The free UAE compliance calendar from Qawi lists your company's UAE tax and compliance deadlines, personalised from a few questions, as a PDF and calendar file.
Frequently asked questions
Do free zone companies pay corporate tax in the UAE?
Yes, free zone companies sit inside the corporate tax regime: a Qualifying Free Zone Person pays 0% on Qualifying Income, and income that isn't Qualifying Income is taxed at 9%, according to the FTA's announcement of its Corporate Tax Guide on Free Zone Persons (26 May 2024). A company that loses Qualifying Free Zone Person status becomes subject to the standard corporate tax rules and rates.
What is a Qualifying Free Zone Person?
A Qualifying Free Zone Person is a free zone person that meets the conditions in Article 18(1) of the corporate tax law plus two more set by Article 5 of Ministerial Decision No. 229 of 2025: non-qualifying revenue within the de minimis limit, and audited financial statements. If any condition fails at any point in a tax period, the status ends from the start of that period and for the four periods after it.
What counts as qualifying income for free zone companies?
Cabinet Decision No. 100 of 2023 sets the categories of Qualifying Income in Article 3, and Ministerial Decision No. 229 of 2025 sets which activities are Qualifying Activities. One category, any other income, counts as Qualifying Income only when the company satisfies the de minimis requirements.
About Qawi · Qawi is a corporate services firm licensed in the Sharjah Media City (SHAMS) free zone, handling company formation, visas and PRO, bookkeeping, VAT and corporate tax for UAE businesses. Guides are researched from FTA, Ministry of Finance and free zone sources. Qawi on LinkedIn
Sources
- Ministerial Decision No. 229 of 2025 on Qualifying Activities and Excluded Activities, Ministry of Finance
- Cabinet Decision No. 100 of 2023 on Determining Qualifying Income for the Qualifying Free Zone Person, Ministry of Finance
- Ministerial Decision No. 265 of 2023 (repealed by Ministerial Decision No. 229 of 2025), Ministry of Finance
- Corporate Tax Guide: Free Zone Persons (CTGFZP1), Federal Tax Authority
- FTA issues Corporate Tax Guide on Free Zone Persons, Federal Tax Authority, 26 May 2024
- Ministry of Finance announcement on Ministerial Decisions Nos. 229 and 230 of 2025
Last checked: 26 October 2026
This is general information, not tax or legal advice for your specific situation.